SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the period ended March 31, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to ________.
Commission File Number: 0-18148
DEAN WITTER REALTY YIELD PLUS, L.P.
(Exact name of registrant as specified in governing instrument)
Delaware 13-3426531
(State of organization) (IRS Employer Identification No.)
2 World Trade Center, New York, NY 10048
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212) 392-1054
Former name, former address and former fiscal year, if changed since last
report: not applicable
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
<PAGE>
<TABLE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
DEAN WITTER REALTY YIELD PLUS, L.P.
Consolidated Balance Sheets
<CAPTION>
March 31, December 31,
1995 1994
ASSETS
<S> <C> <C>
Real estate, at cost:
Land $ 31,695,941 $ 31,695,941
Buildings and improvements 143,255,450 142,956,910
174,951,391 174,652,851
Accumulated depreciation 13,238,571 12,098,192
161,712,820 162,554,659
Investment in participating mortgage loan,
net of allowance of $14,570,278 at
March 31, 1995 and December 31, 1994 19,974,382 19,584,348
Cash and cash equivalents, at cost
which approximates market 5,095,460 4,772,726
Cash in escrow 5,000,000 5,000,000
Deferred expenses, net 1,723,573 1,488,502
Other assets 2,082,246 2,410,682
$195,588,481 $195,810,917
LIABILITIES AND PARTNERS' CAPITAL
Mortgage notes payable $ 57,714,877 $ 57,714,877
Accounts payable and other liabilities 4,183,966 4,615,541
Loan from affiliate 1,713,608 1,726,524
Loans payable to bank 9,350,557 9,350,557
Minority interests 19,990,934 19,873,023
92,953,942 93,280,522
Partners' capital (deficiency):
General partners (5,604,482) (5,614,897)
Limited partners ($20 per Unit,
8,909,969 Units issued) 108,239,021 108,145,292
Total partners' capital 102,634,539 102,530,395
$195,588,481 $195,810,917
<FN>
See accompanying notes to consolidated financial statements.
/TABLE
<PAGE>
<TABLE>
DEAN WITTER REALTY YIELD PLUS, L.P.
Consolidated Statements of Income
Three months ended March 31, 1995 and 1994
<CAPTION>
1995 1994
<S> <C> <C>
Revenues:
Rental $6,551,837 $5,640,908
Interest on participating mortgage loan 675,021 638,209
Interest on short-term investments 148,976 68,719
Other 237,000 378,952
7,612,834 6,726,788
Expenses:
Property operating 2,929,418 2,383,531
Interest 1,497,918 917,865
Depreciation 1,140,379 923,355
Amortization 105,335 67,232
General and administrative 164,835 281,673
5,837,885 4,573,656
Income before minority interests 1,774,949 2,153,132
Minority interests 185,811 252,163
Net income $1,589,138 $1,900,969
Net income per Unit of limited
partnership interest $.16 $ .19
<FN>
See accompanying notes to consolidated financial statements.
/TABLE
<PAGE>
<TABLE>
DEAN WITTER REALTY YIELD PLUS, L.P.
Consolidated Statement of Partners' Capital
Three months ended March 31, 1995
<CAPTION>
Limited General
Partners Partners Total
<S> <C> <C> <C>
Partners' capital (deficiency)
at January 1, 1995 $108,145,292 $ (5,614,897) $102,530,395
Net income 1,430,224 158,914 1,589,138
Cash distributions (1,336,495) (148,499) (1,484,994)
Partners' capital (deficiency)
at March 31, 1995 $108,239,021 $(5,604,482) $102,634,539
<FN>
See accompanying notes to consolidated financial statements.
/TABLE
<PAGE>
<TABLE>
DEAN WITTER REALTY YIELD PLUS, L.P.
Consolidated Statements of Cash Flows
Three months ended March 31, 1995 and 1994
<CAPTION>
1995 1994
<S> <C> <C>
Cash flows from operating activities:
Net income $ 1,589,138 $ 1,900,969
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 1,245,714 990,587
Minority interests in earnings of
consolidated partnerships 185,811 252,163
Deferred expenses (340,406) (76,030)
Decrease in other assets 328,436 501,412
Decrease in accounts payable and
other liabilities (431,575) (689,664)
Decrease in loan from affiliate (12,916) (528)
Net cash provided by operating activities 2,564,202 2,878,909
Cash flows from investing activities:
Investment in participating mortgage loan (390,034) -
Contributions by minority interest to
consolidated partnership 219,730 352,976
Minority interest in distributions from
consolidated partnership (287,630) (328,640)
Additions to real estate (298,540) (652,337)
Net cash used in investing activities (756,474) (628,001)
Cash flows from financing activities:
Cash distributions (1,484,994) (1,484,994)
Increase in cash and cash equivalents 322,734 765,914
Cash and cash equivalents at
beginning of period 4,772,726 4,859,851
Cash and cash equivalents at
end of period $ 5,095,460 $ 5,625,765
Supplemental disclosure of cash flow information:
Cash paid for interest $ 1,509,527 $ 926,830
<FN>
See accompanying notes to consolidated financial statements.
/TABLE
<PAGE>
DEAN WITTER REALTY YIELD PLUS, L.P.
Notes to Consolidated Financial Statements
1. The Partnership
Dean Witter Realty Yield Plus, L.P. (the "Partnership") is a limited
partnership organized under the laws of the State of Delaware in 1987.
The Managing General Partner of the Partnership is Dean Witter Realty
Yield Plus Inc., which is wholly-owned by Dean Witter Realty Inc.
("Realty").
The financial statements include the accounts of the Partnership, DW
Columbia Gateway Associates, DW Michelson Associates, DW Lakeshore
Associates, Deptford Crossing Associates, Hampton Crossing Associates,
and, effective April 4, 1994, DW Community Centers Limited Partnership
and DW Maplewood Inc. on a consolidated basis. All significant
intercompany accounts and transactions have been eliminated.
The Partnership's records are maintained on the accrual basis of
accounting for financial reporting and tax reporting purposes.
Net income per Unit amounts are calculated by dividing net income
allocated to Limited Partners, in accordance with the Partnership
Agreement, by the weighted average number of units outstanding.
In the opinion of management, the accompanying financial statements,
which have not been audited, include all adjustments, consisting only of
normal recurring accruals, necessary to present fairly the results for
the interim periods.
2. Real Estate
401 East Ontario Street, Chicago, Illinois
In late February 1995, cracks and spalling were observed on certain
portions of the concrete exterior at the 401 East Ontario property. In
March, evaluation, testing and analysis of the cause and severity of the
problem was begun by two independent engineering firms retained by the
Partnership. Their preliminary findings suggest that cracking and
spalling of this type are not typical of a building which is only five
years old. The Partnership expects to receive their final report in
early summer, which will include recommendations and estimates of costs
of repair.
The Partnership has notified its insurance carrier of these occurrences
and its remedial activities to date; the carrier has not indicated
whether or to what extent it will assume responsibility for testing
and/or remediation costs. The Partnership has also initiated litigation
against the architect, structural engineer and general contractor who
designed and built the property.
The cost of repairs and the extent to which they may be recoverable
through insurance or litigation proceeds cannot be determined at this
time.
3. Investment in Participating Mortgage Loan
One Congress Street, Boston, Massachusetts
In January 1995, the Partnership funded the remaining portion of its loan
commitment to the borrower of $390,034. As a result of these advances,
the Partnership fully funded its loan commitment of $34.35 million.
In 1994, one of the general partners of the borrower had filed a
voluntary petition under Chapter 11 of the Bankruptcy Code.
Additionally, in February 1995, the borrower did not pay the real estate
taxes due on the property in full. Each of these matters constituted an
event of default under the first and second mortgage loans. However,
neither mortgage lender declared a default, and the delinquencies were
subsequently resolved with the borrower.
4. Related Party Transactions
An affiliate of Realty provided property management services for four
properties for the three months ended March 31, 1995 and 1994. The
Partnership paid the affiliate management fees of $80,916 and $79,200 for
the three months ended March 31, 1995 and 1994, respectively.
Realty performs administrative functions, processes certain investor
transactions and prepares tax information for the Partnership. For each
of the three-month periods ended March 31, 1995 and 1994, the Partnership
incurred approximately $110,000 for these services.
As of March 31, 1995, Realty and its affiliate were owed a total of
approximately $53,000 for the above-mentioned services.
The Partnership borrowed funds from an affiliate of Realty. Interest
expense, which was calculated at the prime rate, amounted to $36,574 and
$25,725 for the three months ended March 31, 1995 and 1994, respectively.
5. Subsequent Event
On April 27, 1995, the Partnership paid a cash distribution of $.15 per
Unit to Limited Partners. The cash distribution aggregated $1,484,994
with $1,336,495 distributed to Limited Partners and $148,499 distributed
to the General Partners.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
The Partnership raised $178,199,380 through a public offering which
terminated in 1987. The Partnership has no plans to raise additional
capital.
The Partnership had originally committed the proceeds raised in the
offering to seven investments in loans or land leases, which provided for
a fixed current return and participation in the long-term appreciation
and/or revenue from operation of the properties involved in such
investments. Due to the weakness in real estate markets, most of the
properties did not generate sufficient cash flow to fully service their
debt. As a result, through March 31, 1995, the Partnership acquired,
through foreclosure, or through transfers of ownership interests in lieu
of foreclosure, all but one of the properties in which it originally
invested. The resulting foreclosures have effectively changed the
Partnership from a participating lender to an equity owner of real
estate. As a result, the Partnership receives all cash flow from the
properties it owns, and will be required to expend funds for tenant
improvements and leasing commissions in connection with the leasing of
vacant space as is customary in most real estate markets.
Many real estate markets are stabilizing primarily due to the continued
absence of significant construction activity. However, the recovery of
the office market has been and may continue to be slow because tenant
demand is weak as a result of continued downsizing by many major
corporations. Increased consumer spending has helped the retail property
market although increased interest rates have slowed spending.
Because the market for retail properties has improved, the Managing
General Partner hopes it will be able to sell some of the Partnership's
retail properties in the next twelve to eighteen months; there can be no
assurances, however, that any sales will be consummated.
Real estate markets are generally divided into sub-markets by geographic
location and property type. Not all sub-markets have been affected
equally by the above factors.
During the three months ended March 31, 1995, all of the Partnership's
properties generated positive cash flow from operations, and it is
expected that they will continue to do so. Also, in this period,
Partnership cash flow from operations exceeded distributions to
investors, capital expenditures and investments in participating mortgage
loans.
As of March 31, 1995, the Partnership has commitments to contribute to
DW Michelson Associates approximately $1,100,000 for tenant improvements
and leasing commissions at 2600 Michelson Drive.
The timing and cost of leasing the vacant space at the Partnership's
properties will impact the level of the Partnership's cash reserves in
1995.
The Partnership's participating mortgage loan is secured by the One
Congress Street property. The office space there is 100% leased to a
federal agency, the General Services Administration ("GSA") under a lease
that is cancelable by the GSA for some or all of their space in August
1995 or thereafter and terminates in 1997. Pursuant to the lease, the
GSA was entitled to a five-month free rent period, which began in August
1994 and ended in January 1995, in connection with GSA's financing of
tenant improvements for its premises. The borrower used cash reserves
at the property, and the remaining unadvanced portion of the loan
commitment to pay debt service during the free rent period.
If GSA excercises its option to terminate some or all of its space,
property cash flow will be reduced, and the owner may not be able to meet
its minimum debt service obligation.
The borrower has made a claim against GSA of approximately $3.3 million
for the costs incurred in connection with the GSA tenant improvements;
GSA has responded by disputing the amount claimed. The borrower and GSA
are continuing negotiations to resolve this matter.
The Partnership has borrowed approximately $1.7 million from an affiliate
of Realty. The loan bears interest at the prime rate.
The Partnership has borrowed approximately $9,400,000 under two bank
lines of credit which total $11,000,000. The loans bear interest,
payable monthly, and are repayable in thirty-one installments beginning
March 1, 1996. Effective March 17, 1995, the Partnership can change the
interest rate on some or all of the loans to a fixed rate based on the
LIBOR rate plus 1.75%. The Partnership can also choose a period of one,
two, three or six months during which the fixed rate will apply. The
loans are secured by a first mortgage on the Greenway Pointe and Midway
Crossing properties and an assignment of distributions from the Michelson
property.
The Partnership provided a $5 million letter of credit, secured by the
Partnership's cash reserves, to the first mortgage lender at the Deptford
Crossing property to secure repayment. The letter of credit will be
reduced further to $3 million if the property achieves certain debt
service coverage levels and meets other conditions of the first mortgage
loan.
On April 27, 1995, the Partnership paid the first quarter cash
distribution of $.15 per unit to Limited Partners. The total cash
distribution was $1,484,994 with $1,336,495 distributed to Limited
Partners and $148,499 distributed to the General Partner.
Further information relating to the Partnership's liquidity and capital
resources is included in footnotes 2 and 3 to the consolidated financial
statements in Item 1 above.
Operations
Fluctuations in the Partnership's operating results for the three-month
period ended March 31, 1995 compared to 1994 are primarily attributable
to the following:
The increases in rental income, property operating expenses, interest
expense, depreciation and amortization in 1995 as compared to 1994
resulted from recording property operations for the Farmington, Midway,
and Genesee shopping centers upon their acquisition beginning in April
1994.
The decrease in other income is due to a receipt in 1994 of $350,000 from
the developer of the 401 East Ontario Street property in exchange for the
Partnership's release of the principals of the developer of the property
from any continuing liability under their deficit guaranty. This
decrease was partially offset by the receipt in 1995 of a lease
termination fee of $150,000 at the Michelson property.
The decrease in general and administrative expense primarily results from
decreased legal fees incurred in connection with foreclosures and
restructurings.
A summary of the office, retail, residential and research and development
building markets where the Partnership's properties are located and the
performance of each property is as follows:
Greenway Pointe, located in Columbia, Maryland has been affected by an
oversupply of research and development buildings in its market area.
Current vacancy levels in the Columbia research and development market
are approximately 18%. During the first quarter of 1995, occupancy at
the property increased from 94% to 99%. Leases totaling 25% of the
property's space are scheduled to expire in 1996.
401 East Ontario Street is located in a strong residential sub-market in
Chicago, Illinois in which the market vacancy rate is very low. There
is no new construction in this market and many competing area properties
have converted to condominiums. During the first quarter of 1995,
occupancy at the property remained at 94%.
Although the office market in Irvine, California, the location of 2600
Michelson Drive is improving slightly, the market vacancy rate is
approximately 18%. As of March 31, 1995, the property was approximately
91% leased (including the leases of some tenants who moved into their
space in the second quarter of 1995). Leases for approximately 22% of
the property's space are scheduled to expire during the remainder of 1995
and 1996.
Deptford Crossing, located in Deptford, New Jersey, has been affected by
a combination of the recession in real estate and retailer reluctance to
expand, which has exerted downward pressure on rents and has made further
leasing difficult. During the first quarter of 1995, occupancy at the
property remained at 82%. No significant leases are scheduled to expire
before 1997.
In contrast, Rochester Hills, Michigan, the location of Hampton Village
Centre has remained a relatively stable and strong retail market. During
the first quarter of 1995, occupancy at the property remained at 96%.
Leases for approximately 10% of the property's space are scheduled to
expire in 1996.
The office space at One Congress Street, located in Boston, Massachusetts
has not been affected by the weakness in the Boston economy. However,
some or all of the space covered by the GSA lease is cancelable beginning
in August 1995 and terminates in 1997. Additionally, the retail space,
which is a small portion of the property, has been difficult to lease due
to reduced demand for retail space. During the first quarter of 1995,
occupancy at the office and garage space remained at 100%, and occupancy
at the retail space decreased to 17% in April 1995.
Flint, Michigan, the location of the Genesee Crossing shopping center,
is an active retail market with a relatively low vacancy rate. During
the first quarter of 1995, occupancy at the property remained at 99%.
No significant leases are scheduled to expire in the near future.
Builder's Square, which owns an 80,000 square foot store at the center,
has announced it will leave its building at the end of the year and move
into a bigger location in the area. Builder's Square has leased the
space to two new tenants which are home entertainment and electronics
retailers. The Partnership believes that the new retailers will increase
traffic at the property.
Elyria, Ohio, the location of the Midway Crossing shopping center, is a
relatively stable retail market, with little vacancy in the vicinity.
The property is located across from a successful regional mall. During
the first quarter of 1995, the property remained fully occupied. Leases
totaling 12% of the property's space are scheduled to expire in 1996.
Farmington Crossroads shopping center is located in the affluent suburban
community of Farmington, Michigan. Farmington's retail market has a
relatively low vacancy rate. During the first quarter of 1995, occupancy
at the property remained at 93%. No significant leases are scheduled to
expire in the near future.
Inflation
Inflation has been consistently low during the periods presented in
the financial statements and, as a result, has not had a significant
effect on the operations of the Partnership or its properties.
PART II - OTHER INFORMATION
Not applicable<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
DEAN WITTER REALTY YIELD PLUS, L.P.
By: Dean Witter Realty Yield Plus Inc.
Managing General Partner
Date: May 12, 1995 By: /s/E. Davisson Hardman, Jr.
E. Davisson Hardman, Jr.
President
Date: May 12, 1995 By: /s/Lawrence Volpe
Lawrence Volpe
Controller
(Principal Financial and
Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Registrant is a limited partnership which invests in real estate,
participating mortgage loans,and real estate joint ventures. In accordance
with industry practice, its balance sheet is unclassified. For full
information, refer to the accompanying unaudited financial statements.
</LEGEND>
<CIK> 0000810116
<NAME> DEAN WITTER REALTY YIELD PLUS, LP
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1995
<CASH> 10,095,460
<SECURITIES> 0
<RECEIVABLES> 647,214
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 195,588,481<F1>
<CURRENT-LIABILITIES> 0
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 102,634,539<F2>
<TOTAL-LIABILITY-AND-EQUITY> 195,588,481<F3>
<SALES> 0
<TOTAL-REVENUES> 7,612,834<F4>
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 4,525,778
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,497,918
<INCOME-PRETAX> 1,589,138
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,589,138
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,589,138
<EPS-PRIMARY> .16<F5>
<EPS-DILUTED> 0
<FN>
<F1>In addition to cash and receivables, total assets include net investments
in real estate of $161,712,820, net investments in participating mortgage
loan of $19,974,382, net deferred expenses of $1,723,573 and other assets
of $1,435,032.
<F2>Represents partners' capital.
<F3>Liabilities include mortgage notes payable of $57,714,877, minority
interests of $19,990,934, loans payable to bank of $9,350,557 and accounts
payable and other liabilities of $5,897,574.
<F4>Total revenue includes rent of $6,551,837, interest on participating
mortgage loans of $675,021, interest on short-term investments of
$148,976 and other revenue of $237,000.
<F5>Represents net income per Unit of limited partnership interest.
</FN>
</TABLE>
